In recent weeks, we have been looking for a breakdown in the JPY. If you read this post from two weeks ago, we outlined equities and bonds which may be the catalyst.

Today, we have seen gold break a major support of $1300, which technically is a “bearish wedge” pattern. The first target from the December 2015 lows to July 2016 lows comes in just above $1250. So in other words, gold has some distance to fall from current levels.

If that is the case, the JPY and gold correlation (gold and USD/JPY inverse correlation) is quite strong as well. Take a look below:

Gold is the candlestick chart, USD/JPY is the line chart

Since the USD/JPY finally broke higher out of the 2016 down channel overnight, we could be in store for a move to 105.00 (or higher) in the coming weeks.

Blake Morrow

Disclaimer: I am long USD/JPY and I am looking to add to current long exposure in the coming days.